Differences from Hotels

There are several differences between hostels and hotels. Some major advantages of hostels include:
Hostels tend to be budget-oriented. Rates are considerably lower, and many hostels have programs to share books, DVDs, and other items.
For those who prefer an informal environment, hostels do not usually have the same level of formality as hotels.
For those who prefer to socialize with their fellow guests, hostels usually have more common areas and opportunities to socialize.

[edit] Disadvantages

Youth hostel in Guadalajara, Jalisco, Mexico.
There is less privacy at hostels than at hotels. Sharing a sleeping dormitory is very different from staying in a private room at a hotel or Bed & Breakfast, and might not be comfortable for those requiring more privacy.
Theft can be a problem since guests may share a common living space, but this can be avoided by securing guests' belongings. Most hostels offer some sort of system for safely storing valuables, and an increasing number of hostels offer private lockers.
Noise can make sleeping difficult on occasions, whether from snoring, sexual activity, someone returning late or leaving early, or the close proximity of so many people. This can be easily solved by wearing earplugs when visiting noisier hostels, but only if you do not need to get up earlier than you would naturally wake up. The earplug option might not work in the event that you must be awakened by a noise alarm. In such a case, either asking someone to wake you up before you go to sleep (an option that might require socializing with other guests -- something that should be easy to do at a hostel) or the use of a vibrating alarm (a device that is kept in contact with the sleeping body, e.g. under a pillow) are viable solutions.